A national databank nicknamed Emili used by the Canada Mortgage and Housing Corporation (CMHC) is suspected of maintaining flawed data that has seriously exaggerated the value of homes across the country, and the amount banks and other lending institutions calculate what they can charge for lending as a result. Emili is an electronic way to measure home value without the need of a home appraiser physically visiting the property. But because Emili bases its projections on general assumptions from past sales in a whole community rather than the specific property, there is a fear that home buyers are paying more than the property itself may be worth.
Rick Sieb, President of Intercity Appraisals Ltd. in Vancouver is very critical of the Emili data bank, saying in the end it’s the person buying the home hurt most by the inaccurate projections.
“So the lender still lends the money, the guy still buys it, and the only person hurt in the whole deal is the person who paid too much.”
While the housing market was still expanding rapidly there was less concern about inaccurate home value projections because there was less worry about default mortgages or repossessed property. But now as Canada’s housing market is slowing down and some economists, including Finance Minister Jim Flaherty, worry about a bubble due to overburdened household debts, the privacy surrounding Emili is going public. The documents also say that mortgages obtained through the CMHC as a result of Emili appraisals may have had higher mortgage rates associated with them than necessary, again hurting the home buyer as a result.
Canada’s ballooning debt has been a concern for many, especially Bank of Canada Governor Mark Carney. But when information like this reveals debts are accumulated because of inaccurate projections from the organizations buyers are forced to use, the slow decline of the housing market may suddenly become a steep slope.